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| Negotiable interest rates proposed on short term loans |
| 09/Mar/2010 Intellasia | Nguoi Lao Dong |
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| 9 Mar, 2010 - 1:57:04 PM |
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State Bank of Vietnam (SBV) has approved commercial banks to apply negotiable interest rates on medium and long term loans; however the lending rate could not be lowered as commercial banks still have to raise deposits at high rates.
According to banks, in the capital structure, up to 90 percent of deposits from residents mainly carry terms of 1-3 months. The real deposit rate reaches the threshold of 12 percent pa (including the ceiling deposit rate of 10.5 percent pa and promotions) plus the business cost of 4 percent pa. So the lending rate could not be less than 16 percent pa. But, not all borrowers can take bank loans at such a high lending rate.
Factually, banks still are watching other's move in lowering saving rates. Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) has cut down the deposit rates for over four months down to below 10.49 percent pa. Asia Commercial JS Bank (ACB) also reduced the week saving rates. Remaining terms of 1-12 months of many banks are common at 10.49 percent pa. In which, some banks continue offering promotions through presenting cash and gift to depositors, showing that the deposit rate race remains tense. So a lot of banks do not want to lower deposit rates for the fear of the money outflow to other banks. Specialists proposed that Vietnam Banks Association should go an agreement to reduce interest rates or Central Bank should soon announce effective measures to cut down both deposit and lending rates.
Because banks are not allowed to impose negotiable rates on lending for working capital (short term loans), so the ceiling of short term lending rate for production business still is curbed at 12 percent pa. Usually, in the start of Lunar New year, banks will provide annual credit limit to enterprises. To obtain the credit limit, enterprises have to pay the lowest service fee of 4 percent pa on total approved loans along with the official lending rate of 12 percent pa and strict lending requirements of banks. Only providing loans at 16 percent pa aims to ensure the minimum profitability.
Right after granting credit limits to enterprises, banks will collect the service fee of 4 percent pa. For example, a company is granted a loan of one billion dong, the lender will collect 40 million dong of kinds of service fees immediately, and thus the real loan that the enterprise receives is only 960 million dong. SBV should allow commercial banks to apply negotiable interest rates on loans for working capital. By that time, production and business firms with high profitability potential will accept to borrow loans at high rates.
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